Kellogg has more than 2,000 employees in Battle Creek. It is the city's largest employer. / John Raoux/Associated Press

Written by

Jennifer Bowman

GANNETT MICHIGAN

Battle Creek-based Kellogg will cut its global workforce by 7% over the next four years as part of an effort to cut costs, with the cereal maker citing weaker-than-expected sales for the third quarter of 2013.

It also lowered its outlook for the year.

The reduction effort, dubbed Project K, will produce cash savings expected to reach an annual run-rate of between $425 million and $475 million in 2018. The program’s expected after-tax rate of return is about 30%. Alistair Hirst, the company’s senior vice president of its global supply chain, told analysts today that the program will result in consolidation of plants and production lines.

It is “not an exercise in headcount reduction,” he said, and the move is difficult but “necessary for the long-term health of the business.”

The company said in a statement that some employee notifications will take place this week.

Kellogg did not provide details on how Battle Creek workers would be affected by the program, but CEO John Bryant said that the company remains committed to the local community. He cited recent investments in its research and development facility, donations to the United Way of the Battle Creek and Kalamazoo Region and the local impact of the company’s Pringles acquisition.

“This is our hometown, we’ve been here for 106 years and our goal is to build a strong Kellogg Company long-term,” Bryant said.

That strategy, he said, will ultimately help both Kellogg and Battle Creek.

Kellogg has more than 2,000 employees in Battle Creek, according to economic development group Battle Creek Unlimited’s website. It is the city’s largest employer, ahead of international auto suppliers based in the Ft. Custer Industrial Park.

According to FactSet, the company has a total of 31,000 employees, suggesting the company plans to cut about 2,170 jobs.

Bryant said in a conference call that the program would help the company’s efforts to reinvest in Kellogg’s cereal business, increase brand-building and build “global category teams.” Savings related to the program are expected to be minimal in 2013, he said.

Company officials also said that for the latest quarter it earned $326 million, or 90 cents per share. Not including one-time items, it earned 95 cents per share, which was above the 89 cents per share Wall Street expected.

A year ago, the company earned $318 million, or 89 cents per share.

Revenue slipped to $3.72 billion and was short of the $3.73 billion analysts expected.

Kellogg’s morning foods business in the U.S. has continued to struggle, falling by 2.2% in the quarter and suffering from disappointing cereal sales. The company again touted the success of its Pringles purchase last year, hoping the brand will build a bigger presence in its international markets. Its U.S. snacks sales, however, fell by 2.5%.

Kellogg stock closed up 43 cents at $62.72 on the New York Stock Exchange.

The Associated Press contributed to this report. Jennifer Bowman works in Battle Creek.